BP set for future on North Slope

Posted: Friday, November 05, 2004

By PHIL HERMANEKPeninsula Clarion

The program manager for BP's gas-to-liquids test facility in Nikiski did not paint a rosy picture for the plant's future but did tell Kenai business leaders Wednesday the company plans to build a long-term business on Alaska's North Slope.

Saying the GTL plant currently is down while technicians tear apart and look at equipment, John White told members of the Kenai Chamber of Commerce the plant will be back up after refurbished parts are returned late this year.

"The technology looks promising," White said of the conversion process that turns natural gas into liquids for ease of transporting around the world.

He also said the plant has always been a test facility and was never meant to be a commercial production facility.

When asked if the Nikiski plant would continue to operate for months or years after it is operational again in mid-January, White said, "I try not to predict, but it would certainly be in months, not years."

He also said BP is looking to license the process, which might affect the Nikiski facility. The plant currently employs 15 people.

White began his formal presentation on the status of BP operations in Alaska by comparing the company's presence to the story of Rip Van Winkle.

"For more than 25 years, we invested heavily in Alaska, actively exploring for new oil, and you always saw our ads on TV," he said.

"Then it might have seemed like we ventured off someplace and fell asleep.

"Mostly what you've heard about us since then is that we quit exploring in Alaska. We haven't had any major new developments like Northstar, and we've been less visible in the state," White said.

"Today, I'd like to update you on what BP has been doing in Alaska. BP remains the number one investor in Alaska. This year we plan to invest $650 million in our Alaska business," he said.

White said that between operations and capital expenditures, BP spends about $1 billion each year in Alaska and employs 1,300 people here.

The oil company executive told the business people that BP's costs in Alaska are 60 percent higher on a per-barrel basis than the company's global average, its transportation costs in the state are four times higher than the global average and returns on investment are only about one-third of the average.

BP continues to do business here, however, because "Alaska accounts for roughly 10 percent of our global oil and gas production, and we still see tremendous potential here," White said.

Comparing the company's exploration and development success rate on the North Slope to the athletic prowess of famous athlete Michael Jordan, White said BP's exploration talents are like Jordan's talent on the baseball diamond, while its development success more closely resembles Jordan's abilities on the basketball court.

"Between 1991 and 2001, we added six times as many reserves by extending existing fields than we did by exploring," White said.

He said the company is focusing on two cost-reduction programs in Alaska: transforming North Slope operations to reduce operating costs, and investing in four new $250 million double-hulled oil tankers and working with Alyeska Pipeline to reduce transportation costs.

A company public affairs representative who accompanied White Daren Beaudo distributed full-color brochures describing the new ships, called Alaska Class tankers, which can carry 1.3 million barrels of crude oil.

The "Alaska Frontier," the first of the four tankers, was launched earlier this year.

The company also is focusing on two production-sustaining programs in Alaska: commercializing the "viscous oil resource" and gas on the North Slope.

White said the viscous oil resource on the North Slope "rivals the Prudhoe Bay field itself in size."

He said the cold, thick oil, which is hard on extraction equipment and facilities, accounts for 5 percent of all North Slope production.

"We believe viscous production could more than triple by 2010," White said.